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SENIOR CONVERTIBLE NOTE

Convertible Promissory Note

SENIOR CONVERTIBLE NOTE | Document Parties: REMOTE KNOWLEDGE, INC | SLW INTERNATIONAL, LLC You are currently viewing:
This Convertible Promissory Note involves

REMOTE KNOWLEDGE, INC | SLW INTERNATIONAL, LLC

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Title: SENIOR CONVERTIBLE NOTE
Governing Law: Texas     Date: 8/28/2008
Industry: Scientific and Technical Instr.     Sector: Technology

SENIOR CONVERTIBLE NOTE, Parties: remote knowledge  inc , slw international  llc
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SENIOR CONVERTIBLE NOTE

 

$800,000.00                                                    Houston, Texas                                                     August 21, 2008

 

FOR VALUE RECEIVED, the undersigned, REMOTE KNOWLEDGE, INC., a Delaware corporation (“Borrower”), hereby promises to pay to the order of SLW INTERNATIONAL, LLC, a Texas limited liability company (“Lender”), at its designated office, in lawful money of the United States of America, the principal sum of EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($800,000.00), or such lesser amount as is advanced hereunder, together with interest thereon at the rate set forth below.

 

1.   (a) All principal outstanding under this Note (pursuant to the renewal, extension and conversion of the Prior Note (as hereinafter defined)) shall bear interest retroactive to the date of initial funding and prior to maturity at a rate equal to the lesser of (i) the Maximum Rate and (ii) fifteen percent (15%) per annum.

 

         (b) If an Event of Default has occurred all principal outstanding under this Note shall bear interest at the lesser of (i) the Maximum Rate and (ii) eighteen percent (18%) per annum.

 

2.   Interest on the indebtedness evidenced by this Note shall be computed on the basis of a year of 360 days and the actual number of days elapsed (including the first day but excluding the last day) unless such calculation would result in a usurious rate in which case interest shall be calculated on the basis of a year of 365 or 366 days, as the case may be.

 

3.   Principal of and interest on this Note shall be due and payable on the Maturity Date except as otherwise provided herein.

 

4.   Borrower shall pay to Lender a commitment fee in the amount of $12,500.00 in connection with the funding of the Prior Note which occurred on February 25, 2008.  On the date hereof, Borrower shall pay to Lender a commitment fee in the amount of $75,000.00 for the increase of the Prior Note which occurred on May 30, 2008, and the extension of the Maturity Date and the conversion evidenced by this Note.  Such commitment fees shall be funded to Lender on behalf of Borrower out of the proceeds of the advances hereunder and shall be fully earned when paid.

 

5.   Lender agrees to fund this Note to Borrower in accordance with the express terms hereof in one or more advances.  Borrower may not reborrow any portion of this Note which is repaid hereunder.

 

6.   This Note is guaranteed as provided in the Guaranty Agreements (hereinafter defined) and is secured by a first priority pledge of any and all assets of Borrower, now owned or hereafter acquired or developed, as provided in the Security Agreement (hereinafter defined).

 

 

7.   (a)           At any time and from time to time, Lender may elect, upon not less than seventy-five (75) days notice to Borrower, at its sole discretion, by written notice to Borrower, to convert or exchange all or any part of the amounts outstanding under this Note and any accrued and unpaid interest thereon into Borrower common stock (“Conversion Interests”) as reflected below.  Each $0.04 of the outstanding balance of this Note (the “Conversion Price”) may be converted into or exchanged for one (1) share of Borrower common stock based on 62,500,000 outstanding shares of Borrower stock (the “Common Stock”) on a fully diluted basis.

 

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         (b)   The Conversion Price shall be subject to adjustment from time to time as hereinafter provided in order to prevent the dilution of Lender’s right to acquire shares of Borrower’s Common Stock hereunder.  Upon each adjustment of the Conversion Price, Lender shall thereafter be entitled to acquire, at the Conversion Price resulting from such adjustment, the number of shares of the Common Stock obtained by multiplying the Conversion Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Conversion Price resulting from such adjustment.

 

The Conversion Price shall be subject to adjustment from time to time as follows:

 

(i)  

Stock Splits and Combinations . If Borrower effects a subdivision of the Common Stock, the Conversion Price in effect immediately before such subdivision shall be proportionately decreased.  If Borrower shall at any time or from time to time after the date hereof combine the Common Stock into a smaller number of shares, the Conversion Price in effect immediately before such combination shall be proportionately increased.

 

(ii)  

Common Stock Dividends and Distributions . If Borrower makes a dividend or other distribution payable in additional shares of Common Stock, in each such event, the Conversion Price shall be decreased by multiplying the Conversion Price then in effect by a fraction, the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance and the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

(iii)  

Capital Reorganizations . If there is a capital reorganization of the Common Stock, provision shall be made so that Lender shall thereafter be entitled to receive upon the exercise hereof the number of shares of Common Stock deliverable upon exercise immediately prior to such event would have been entitled as a result of such capital reorganization.

 

(iv)  

Other Adjustment .  In the event of any other event or circumstance which results in any increase in or other change to the issued and outstanding shares of the Common Stock of the Borrower from and after the date hereof, including without limitation, any public or private offering of securities of the Borrower and any issuance of securities in connection with any merger, acquisition, disposition or other similar transaction, such that Lender’s right to acquire such shares of Common Stock will be diluted as a percentage of Borrower’s outstanding shares of Common Stock following such event or circumstance, the Conversion Price shall be adjusted as necessary in order to prevent any such dilution.

 

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Notwithstanding the foregoing, no adjustment in the Conversion Price shall be made in connection with or as a result of any dilutive issuance of common shares related to a compensatory issuance of common shares to the employees or directors of Borrower as approved by Borrower’s board of directors.

 

All election notices, once given by the Lender, shall be revocable until the date ten (10) days prior to the date the election is effected.  Borrower hereby agrees to take all action and to execute, deliver and file such documents or instruments, including, without limitation, amendments to its charter and constituent documents, as may be required in order to give effect to Lender’s conversion rights under this paragraph.

 

(c)   To the extent of Borrower’s delivery to the Lender of the number of Conversion Interests into which the amounts outstanding under this Note whether in whole or in part, is convertible pursuant to the election made above (together with the cash payment in lieu of any fractional share of Conversion Interests as contemplated below), such delivery will be deemed to satisfy Borrower’s obligation to pay the principal amount of this Note and the accrued and unpaid interest thereon.  At Borrower’s option, all then accrued and unpaid interest related to any such converted principal amount shall be payable in cash by Borrower in lieu of any Conversion Interests.

 

(d)   No conversion shall result in the issuance of fractional shares of Conversion Interests.  If Lender would otherwise be entitled to a fractional share, then Borrower shall pay to the Lender an amount equal to the conversion value of such fractional share unless the Lender has elected to maintain its commitment under this Note.

 

(e)   Upon any conversion of this Note into Conversion Interests, Borrower shall, at its expense, deliver to Lender as soon as practicable a certificate representing the number of Conversion Interests to which Lender is entitled as provided in paragraph (a) above at which time Lender shall surrender this Note to Borrower if all the outstanding principal hereof and accrued interest thereon is being converted or exchanged.  In the event Lender elects to convert or exchange less than all of the outstanding principal of and accrued interest on this Note, the unconverted portion of such principal and interest shall remain outstanding and Borrower shall promptly issue a replacement promissory note evidencing such outstanding amount in exchange for this Note.  Irrespective of the date of issuance and delivery of any certificates with respect thereto, shares or units of Conversion Interests purchased by conversion as provided herein shall be, and deemed to be, issued to Lender as the record owner of such shares as of the close of business on the date on which this Note shall have been surrendered as aforesaid.

 

(f)   Borrower, upon conversion of this Note, covenants that all shares or units of Conversion Interests that may be issued upon conversion of this Note will, upon issuance thereof, be validly issued, fully paid and nonassessable and free from all preemptive rights, taxes, liens and charges in respect of the issue thereof.  Issuance of certificates for Conversion Interests upon the conversion provided herein shall be made without charge to Lender for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by Borrower, and such certificates shall be issued in the name of Lender.

 

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(g)   Lender acknowledges that this Note does not entitle Lender, by virtue solely of this Note, to any voting rights or other rights as a holder of any Conversion Interests of Borrower prior to the conversion provided for herein.

 

(h)   Borrower covenants that its issuance of this Note shall constitute full authority to its officers who are charged with the duty of executing certificates to execute and issue the necessary certificates for shares or units of Conversion Interests upon the conversion of this Note.

 

 

(i)   Conversions are subject to a $100,000.00 minimum conversion amount (or such lesser amount as may be outstanding under this Note).

 

8.   As used in this Note, the following terms shall have the respective meanings indicated below:

 

“Business Day” means any day on which commercial banks are not authorized or required to close in Houston, Texas.

 

“Cash Flow” means Cash Flow From Operating Activities, as such term is defined by Statement of Financial Accounting Standards No. 95.

 

 “Event of Default” each of the following shall constitute and be deemed an “Event of Default”:

 

a)           Borrower shall fail to pay this Note or any installment of this Note (whether principal or interest) when due.

 

b)           Any representation or warranty made or deemed made by Borrower or any Guarantor or any of its respective officers in any certificate, report, notice, or financial statement furnished at any time in connection with this Note or any Loan Document shall be false, misleading, or erroneous in any material respect when made or deemed to have been made.

 

c)           Borrower or any Guarantor shall fail to perform, observe, or comply with any covenant, agreement or term contained in this Note or any Loan Document (other than as expressly provided in another clause of this definition of “Event of Default”) and such failure shall not have been remedied within ten (10) days after the earlier to occur of (i) notice thereof from Lender or (ii) actual knowledge thereof by Borrower or any Guarantor.

 

d)           Borrower or any Guarantor shall commence a voluntary proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, or other similar official of it or a substantial part of its property or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it or shall make a general assignment for the benefit of creditors or shall generally fail to pay its debts as they become due or shall take any corporate action to authorize any of the foregoing.

 

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e)           An involuntary proceeding shall be commenced against Borrower or any Guarantor seeking liquidation, reorganization, or other relief with respect to it or its debts under any bankruptcy, insolvency, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official for it or a substantial part of its property, and such involuntary proceeding shall remain undismissed and unstayed for a period of thirty (30) days.

 

f)           Borrower or any Guarantor shall fail to pay when due any principal of or interest on any debt for borrowed money (other than the obligations hereunder), or the maturity of any such debt shall have been accelerated, or any such debt shall have been required to be prepaid prior to the stated maturity thereof, or any event shall have occurred that permits (or, with the giving of notice or lapse of time or both, would permit) any holder or holders of such debt or any person acting on behalf of such holder or holders to accelerate the maturity thereof or require any such prepayment.

 

g)           This Note or any other Loan Document shall cease to be in full force and effect or shall be declared null and void or the validity or enforceability thereof shall be contested or challenged by Borrower or any Guarantor, or Borrower or any Guarantor shall deny that it has any further liability or obligation hereunder prior to payment in full of all obligations hereunder.

 

h)           A Material Adverse Effect shall have occurred.

 

i)           The occurrence of an Event of Default (as therein defined) under that certain Credit Agreement dated as of even date herewith among Borrower, Muragai, LLC, a Delaware limited liability company, as the Lender Representative and as a lender, and the other lenders a party thereto (collectively, the “Junior Lenders”), as the same may be amended, modified, restated and/or supplemented from time to time (the “Junior Credit Agreement”).

 

“Guarantors” means Daniel Granader and Randy S. Bayne, each an individual, and each such Person’s heirs, executors, administrators, successors and assigns.

 

“Guaranty Agreements” means each Guaranty Agreement dated as of even date herewith, executed by the respective Guarantors in favor of Lender, as the same may be amended, supplemented or modified from time to time.

 

“Lien” means any lien, mortgage, security interest, tax lien, financing statement, pledge, charge, hypothecation, assignment, preference, priority or other encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or title retention agreement), whether arising by contract, operation of law or otherwise.

 

“Loan Documents” means this Note, the Guaranty Agreements, the Security Agreement and all security agreements, deeds of trust, pledge agreements, assignments, letters of credit, guaranties, certificates and other instruments, documents, and agreements, if any, executed and delivered pursuant to or in connection with this Note, as such instruments, documents, and agreements may be amended, modified, renewed, extended, or supplemented from time to time.

 

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“Material Adverse Effect” means a material adverse effect on (a) the business, operations, property or condition (financial or o


 
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